Turkey: Economy Spells Trouble For Russia, Iran, Azerbaijan

Turkey's latest economic estimates may spell trouble for several natural gas suppliers, including Russia, Iran, and Azerbaijan. All have relied on growth in the Turkish market, and despite plans for a connection to neighboring Greece, there are signs that forecasts there have also been overblown.

Boston, 3 April 2002 (RFE/RL) -- New economic figures from Turkey are raising some old questions about energy planning that could soon cut into gas exports from Russia, Iran, and Azerbaijan.

On Sunday, Turkey's State Institute of Statistics announced that the country's gross domestic product fell 7.4 percent last year, while its gross national product, which includes foreign income, plunged 9.4 percent.

The numbers were far lower than the forecasts of the International Monetary Fund, which has consistently overstated the pace of Turkey's recovery from an economic crisis that started 13 months ago.

Last October, the IMF forecast that Turkey's GDP would drop 4.3 percent. In December, it raised the figure to 6.1 percent. But Turkey's long-delayed official results suggest that the economic decline kept accelerating toward the end of the year. Reuters reported that GDP in the fourth quarter fell 10.4 percent from the year-earlier period.

Most recently in February, the IMF estimated that Turkey's GNP would grow 3 percent this year, a goal that may be hard to achieve. The fund has committed $31 billion in loans to Turkey since December 1999. Impatience is growing, not only with the slow progress but with the forecasts.

In an angry editorial Tuesday, the Turkish Daily News slammed a group of economists who were surveyed last week and predicted slightly better numbers than those announced on Sunday.

The paper said, "The same people, who could not predict anything and drew rosy pictures, today, are once again spearheading a campaign saying we are out of the crisis and well on our way to recovery. Absolute rubbish!" The editorial added, "but this is Turkey. You can always twist and bend figures, toy around with regulations and declare a positive growth."

Turkey has also invested heavily in its own energy forecasts, which call for stellar growth despite steep economic downturns in two of the past three years.

In January, Energy Minister Zeki Cakan predicted an 8 percent rise in energy demand this year, far more than the most optimistic growth rate for the economy as a whole. Cakan said the demand could not be met without rapid moves to increase competition in the power sector, leaving some doubt about whether the figures were real or meant only to accelerate reforms.

Suspicions about Turkey's gas projections have troubled analysts for years. Despite recent cuts in the forecasts, the Turkish state pipeline company Botas still says that gas demand will climb 25 percent this year to 20,000 million cubic meters and more than double again by 2005.

The accuracy is hard to judge because of years of lagging electrification and bureaucratic delays. But past predictions have already proved wildly high, prompting further questions about whether forecasting has been seen as a way to promise economic growth.

In recent years, other countries have also invested in the Turkish growth forecasts by committing billions of dollars for gas pipelines to serve a fast-growing market that has yet to appear. Russia already pipes gas to Turkey by two routes and is due to open a third with the Blue Stream project across the Black Sea this year. Iran opened a pipeline in January, and Azerbaijan is planning a Caspian line by 2005.

While Ankara insists it will not face a glut, it is working on underground storage, and last month it signed a protocol with Greece to build a 285-kilometer pipeline linking the two Mediterranean rivals to ease the pressure of oversupply.

But there are already signs that the same political pressures are being applied to the pipeline and energy forecasts in Greece. According to the Turkish Daily News, the $300-million pipeline will initially carry 500 million cubic meters of gas annually when it is built in about two years.

Botas figures indicate that Turkey will have 5,000 million cubic meters in oversupply this year, or 10 times as much as the pipeline would carry, although it insists that demand will wipe out the surplus by 2003. Analysts have been skeptical.

According to IBS Research & Consultancy in Turkey, the plans for a 36-inch pipeline date back to a meeting in 2000, when Greece's gas demand was forecast to reach 7,500 million cubic meters this year. But figures this month from the Paris-based International Energy Agency indicate that Greece's gas consumption was only 2,000 million meters in 2001, up just 1.1 percent from the previous year.

Earlier this month, Georgios Agrafiotis, the head of Greece's Development Ministry, said that Russian President Vladimir Putin had promised to double the capacity of the Russian pipeline connection to Greece from 3,000 million cubic meters to 6,000 million annually. Russia already supplies nearly all of Greece's gas, but it appears to be in a race with Iran which hopes to use the Turkish link as an opening to Europe.

Despite the talk of growth, Greece negotiated a decrease in its take-or-pay contract with Russia's Gazprom in 2001 after it fell short of its forecast demand. Ultimately, Greece hopes to build yet another pipeline to Italy, a major gas user which consumed 70 billion cubic meters in 2001.

But it seems that both Turkey and Greece are trying to pass on not only the gas from the east, but also the effects of bad forecasting. Suppliers may have to decide when enough gas is too much.